With Dublin house prices stalling in November and the Central Bank’s new mortgage lending guidelines starting to bite, the outlook for property prices in 2015 is looking uncertain.
After rising by over 24pc in the 12 months to October, average Dublin house prices fell slightly last month, according to the latest CSO figures. This was the first significant indication that the recent surge in house prices may be running out of steam.
So why has the property price recovery run into difficulties so soon?
Sure weren’t all of the so-called ‘experts’ assuring us that house prices were under-valued and that prices would continue to rise?
Look again. As regular readers of my Herald articles will need no reminding, I have always been highly sceptical of the house price “recovery” that began in Dublin in early 2013 and in the rest of the country in mid-2014.
The jump in prices took place against a background of minuscule transaction levels, virtually no new housebuilding and tiny mortgage volumes.
That is still the case. A mere 37,000 transactions were listed in the Property Price Register from the beginning of 2014 to Christmas Eve.
While this was up by a quarter on the 29,500 transactions listed for the whole of 2014 it is still a tiny proportion of the 2m houses and apartments in the country.
Based on the latest figures, the average house or apartment can now expect to change hands once every 54 years.
A property market that was merely ticking over would expect to see every property changing hands once a generation, ie once every 20 to 30 years, somewhere between twice and three times current transaction levels.
New housebuilding has virtually ceased with less than 10,000 new houses and apartments likely to be built in 2014, a tenth of the 93,000 built in the peak year of 2006.
While there has been some recovery in mortgage lending, the volumes are still tiny. According to the latest figures from the Banking and Payments Federation, €3.4bn of new mortgages were drawn down during the 12 months to October 2014.
While this was up 30pc on the previous 12 months, it was still less than 10pc of the almost €40bn lent in 2006.
As if this wasn’t enough to be worrying about, the housing market has been hit by two severe blows, one visible and the other largely invisible, in recent months.
In October the Central Bank, worried that a new house price bubble was emerging, moved to introduce tough new mortgage lending rules on the banks.
Less visible has been the withdrawal of cash buyers from the market with the latest BPF figures showing that 28pc of transactions in the third quarter of 2014 were cash deals as against 44pc in the third quarter of 2013.
Now the Real Estate Alliance, a grouping of estate agents, is predicting a 6pc increase in Dublin prices in 2015 and a 20pc increase outside of Dublin.
Maybe, maybe not. While the November pause in Dublin house prices could yet be a temporary blip, the notion that house prices can continue to rise strikes me as fanciful.
As we face into 2015 I have only one piece of advice for would-be house purchasers: buyer beware.